Are Larger Spreads Better For Small Cap Companies?

According to this article in Bloomberg, NYSE Euronext and brokers Cowen Group Inc. and Knight Capital Inc. have initiated the support of a pilot program to increase the minimum-price increment for smaller, less active stocks in order to boost their trading volume. In an attempt to broaden the gap between bids and offers, the pilot program would apply wider price increments by allowing companies to choose and change these increments, or tick sizes. Decimalization, which was implemented in 2001, is said to have affected trading in smaller cap companies as the spreads narrowed, with traders making less money per transaction. It is believed that wider spreads might encourage more market makers to trade smaller stocks, and thus, positively impact liquidity and trading volume.